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CS Professional · Corporate Restructuring, Valuation and Insolvency · Liquidation on or after Failing of Resolution Plan

A creditor, Sundaram Finance Co, with the knowledge and authorisation of its director Ms. Iyer, initiates recovery action against a corporate debtor during the section 14 moratorium. Which penalty applies to Ms. Iyer under section 74?

Ms. Iyer is punishable under section 74(2) with imprisonment of not less than one year but up to five years, or a fine of not less than one lakh and up to one crore rupees, or both, because she knowingly authorised the creditor's violation of the moratorium.

  1. AImprisonment of at least three years up to five years, or fine of one lakh to three lakh rupees, or both
  2. BNo penalty, because only officers of the corporate debtor are liable for moratorium violations
  3. CImprisonment of at least one year up to five years, or fine of at least one lakh rupees up to one crore rupees, or bothCorrect
  4. DFine of up to one crore rupees only, with no imprisonment

Explanation

Section 74(2) applies where any creditor violates section 14. Any person who knowingly and wilfully authorised or permitted it is punishable with imprisonment of one to five years, or fine of one lakh to one crore rupees, or both. The three-to-five year option is the officer penalty under 74(1) and does not apply to the creditor's authoriser.

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